Meet The Finalists For The 2024 Innovation Series: Payments

Think of it as Shark Tank with a credit union spin, and it’s just been renewed for another season.

The 2024 Innovation Series from CreditUnions.com and Callahan & Associates is underway. Every year since 2018, this series has offered a select group of suppliers 10 minutes each to impress an audience of credit union decision-makers. It’s simple: Each vendor pitches its offerings and attendees vote on their favorites.

The Innovation Series was a hit from the get-go and continues to grow in popularity. This year’s focus areas include member analytics, fraud, lending, member experience, and payments.

Read on for more from this year’s payments finalists: Alloya Corporate Federal Credit Union, CU Next Gen, SpenDebt, Tyfone . Plus, make sure to join us for the Innovations In Payments webinar. Register Today! 

Alloya Corporate Federal Credit Union

Describe your innovation. 

To realize the vision of providing credit unions with a unique and competitive offering, Alloya collaborated with two fintech companies – Neural Payments and Prizeout, each with unique benefits for peer-to-peer (P2P) payments – to generate and launch a truly innovative solution that delivers unparalleled value for credit unions, for their members and for the friends and family of their members.

In order to provide this value, the solution had to provide several unique attributes simultaneously rather than providing just one “hook.” Integrating Neural Payments and Prizeout accomplished this.

What opportunity or challenge does it address? 

It addresses several opportunities and challenges.

Opportunities addressed include:

1. 1.  Helping credit unions to play an active role in their members’ daily lives of P2P payments rather than outsourcing this to third-party providers.
   2. Having a solution that is better than what banks have, helping to change the “technology gap” narrative.

Challenges addressed include:

1. 1. Providing a unique and superior member experience while realizing a revenue opportunity without charging members, and at a lower price than other known solutions.
   2. Mitigating fraud through an advanced fraud rules engine and eliminating app registration fraud.

How does it increase member value? 

There are several sources of value for not only members, but also for their friends and family:

• •  It’s simple: Members no longer need to concern themselves with their recipients’ preferred payment channel. With this innovation, receivers always have the power to choose where they want their money to go without having to download an app or register an account. Plus, by eliminating these steps, this innovation also eliminates a variety of vulnerable touchpoints that fraudsters frequently exploit.
  • It gives peace of mind: P2P payments are sent through the credit union’s existing digital banking app, a familiar interface that members trust. To select a payment recipient, the member simply chooses from their phone’s contacts list, then initiates an email or text message – ensuring the payment always goes to the intended person.
  • It strengthens relationships: Members’ P2P payment recipients gain the ability to choose how they want to receive their money – through a debit card, through other third-party apps such as Venmo and PayPal, and coming soon, direct to account through the FedNow® Service. If recipients choose to withdraw their funds in the form of a digital gift card, they get to select their favorite merchant (with hundreds to choose from) plus cash-in on bonus offers at increments as high as 20%! That means a member’s $100 P2P payment could be withdrawn by their recipient as $120 in gift card funds, with premiums funded entirely by the merchant.

What differentiates this innovation from competitors? 

No other P2P solution has this combination of attributes simultaneously:

1. 1. Neither the sender nor recipient needs to download an app.
      • Makes the experience simple for both.
      • Sender uses their credit union’s digital banking application.
      • Eliminates app registration/account takeover fraud.
   2. The sender doesn’t need to worry about what app the receiver has.
   3. The recipient’s phone number or email address can be selected from the sender’s phone contacts list, eliminating concern of sending to the wrong person.
   4. The sending credit union can create custom rules to stop fraud before it happens.
   5. The recipient is contacted through a personal text or email from their friend, giving confidence in identifying the sender.
   6. The recipient is presented with a list of options (customized by the sending credit union) to redeem or withdraw their money (e.g., debit card, Venmo, PayPal, gift card and soon direct to account through the FedNow Service).
   7. When the recipient is presented with redemption/withdrawal options, there is opportunity for the sending credit union to market to recipients, including logos, messaging and hyperlinks.
   8. When choosing a gift card through Prizeout, the merchant provides a bonus to the recipient, and provides the credit union with a small percentage of the transaction value.
   9. Funds are transferred to the recipient’s selected endpoint almost instantaneously. Once integrated with the FedNow Service, the transfer will be truly real-time.

CUNext Gen

Describe your innovation. 

Introducing Pay A Loan, our groundbreaking loan payment solution. This innovative tool simplifies the member experience by integrating external payment sources, enabling account linkage, secure storage, and scheduled payments. Open banking, micro-deposit, and NACHA file support ensure top-tier security and efficiency. In Phase 2, we’ll enhance its capabilities with an external website integration featuring an express checkout for indirect members. This innovation sets a new standard for loan payments, blending advanced technology with user-friendly design.

What opportunity or challenge does it address? 

Our project effectively tackled a critical challenge faced by our clients during their vendor selection process. Recognizing that the estimated timelines from various vendors threatened to delay their go-live date, the client approached us with a specific request: ‘Can you expedite the project to align with our go-live date?’ In response, we not only met their tight deadline but also addressed a common challenge encountered by credit unions in their quest for vendor solutions – the balance between convenience and customization.

How does it increase member value? 

The Pay A Loan innovation significantly increases member value by simplifying the loan payment process and enhancing convenience, security, and efficiency. It seamlessly integrates external payment sources, enabling account linkage, secure storage, and scheduled payments, providing unparalleled convenience to members. Leveraging open banking, micro deposits, and NACHA file support ensures the utmost security and efficiency, fostering member confidence and integrating an express checkout on the external website in Phase 2, further streamlining the payment experience and benefiting indirect members. This innovation’s agility and reliability have been demonstrated in various contexts, showcasing its ability to seamlessly meet critical digital banking conversion needs.

What differentiates this innovation from competitors? 

Unlike off-the-shelf solutions that offer convenience but often lack the desired functionality, our approach centered around providing tailored solutions. We seamlessly incorporated customizations to meet the client’s unique preferences, ensuring that the solution met their immediate needs and laid the foundation for future enhancements. By successfully navigating this opportunity, we not only adhere to the client’s timeline but also delivered a solution that exceeded their expectations in terms of both functionality and adaptability.

SpenDebt

Describe your innovation. 

SpenDebt is a financial technology application designed for making small micropayments (e.g., $1.00), enabling members to simultaneously spend and pay off debt. This Software-as-a-Service (SaaS) micropayment solution aids account receivable teams in daily efforts to recover payments from their members.

What opportunity or challenge does it address? 

SpenDebt’s micropayment solution aids credit unions’ accounts receivable teams in boosting timely payments, preventing member defaults, and decreasing the number of charged-off accounts. Furthermore, it provides an advantage for credit unions by extending the lifetime value of members, promoting their exploration of additional credit products, and enhancing their overall financial well-being.

How does it increase member value? 

SpenDebt contributes to the growth of member value by helping members afford life, breaking down large payments into bite size payments. This encourages and promotes members to additional credit products and supports their progression. Furthermore, it plays a pivotal role in improving members’ overall financial well-being by assisting them in methodically reducing their account balances.

What differentiates this innovation from competitors? 

SpenDebt distinguishes itself from competitors through several key features. Firstly, it provides a micropayment method instead of the round-up approach, empowering members to have control over what gets added with each transaction. Secondly, SpenDebt submits members’ payments monthly, irrespective of the transaction amount. Thirdly, the SpenDebt platform is adaptive, assisting Credit Unions in developing innovative products such as new CDs or emergency savings funds. Lastly, SpenDebt serves as a versatile tool, functioning either as a complementary payment method to support account receivable teams or as a direct benefit offering to members to pay external debts or bills.

Tyfone

Describe your innovation. 

Tyfone offers the Payfinia Instant Payments Xchange™ (IPX), a product enabling financial institutions (FIs) of all sizes to directly connect to the FedNow Service for credit transfer send and receive. For FIs leveraging IPX, accountholders can send and receive payments any time, any day, anywhere, and have full access to those funds immediately. IPX enables institutions to seamlessly send and receive funds via an incredible, cost-effective implementation that will work with any core or digital banking provider. With IPX, FIs can create an instant payment offering, with real time settlement, that will not only serve its account holders but will also be a payment originator and digital banking platform-agnostic solution designed to meet the needs of FIs.

What opportunity or challenge does it address? 

Consumers want to move money at their convenience and have access to their assets 24/7/365, with as limited restrictions as possible. IPX accomplishes this and takes money movement to another level – it moves money instantaneously, cost-effectively and efficiently. Currently, hundreds of FIs are live on the FedNow service and see the potential to embrace the solution for a range of new use cases, including instant payroll for businesses, digital wallet transfers for consumers, earned wage access for employees, insurance claims, tax returns, and more.

How does it increase member value? 

IPX has increased member value for Star One Credit Union (>$10.2 B, 124K members, 22nd largest CU in the U.S.). Star One, an IPX user, collaborated with Tyfone and the Federal Reserve to successfully launch IPX. It was the first institution in the country to initiate a send transaction on the service on July 20, 2023. Since its launch, Star One has seen significant growth in send volume within its membership base. IPX feedback from members and the internal team has been overwhelmingly positive since the launch of FedNow.

• Strong positive response from its account holders and user adoption is growing – the instant payment widget is embedded in members’ existing payments options and as a standalone widget, enabling easy access and streamlining FedNow adoption.
• Instant Pay and Settlement – most transactions occur in less than five seconds. Real time settlement creates significant operational efficiencies for Star One as there are no manual reconciliation processes required.
• Faster payments do not mean faster fraud – fraud losses for Star One are nearly 60% lower than ACH A2A fraud losses.
• Integrated device authentication measures, send limits, and disclosures enabled through Star One’s banking platform help mitigate and minimize fraud.

What differentiates this innovation from competitors? 

While real-time P2P solutions have their merits and are appreciated by members, high transaction costs present a significant hurdle, particularly for smaller credit unions, who many times have decided to opt out of these kinds of technologies. With alternatives such as ACH and Zelle, transactions settle between financial institutions at the end of the day or later in some cases, leading to time-consuming reconciliation work, additional operational costs, and potential discrepancies. In contrast, IPX securely links digital banking, bill payment processors, fintechs, and e-commerce apps via a unified API gateway and settles the transactions instantaneously, supporting diverse money movement methods including FedNow and RTP across several potential use-cases including A2A external transfers, P2P bill payment, disbursements, payroll, tax payments and more.

The beauty of IPX is not only its low cost, real-time capabilities, and adaptability, but also its potential to be harmoniously integrated with other solutions and seamlessly prevent fraud. Whether it is using FedNow as the rails for Zelle or incorporating it with services like PayPal, IPX enables institutions to switch from the ACH rail to the FedNow rail with ease, making the experience seamless. Unlike competitive options, IPX has robust fraud controls, both native and external, built into the solution to prevent account takeovers and scams. The solution’s prevention measures include a cool-off period with restrictions for new recipients, flexible transaction limits for new and existing members, monitoring for known bad actors and individuals/entities with a history of fraud, and live OFAC inquiries for each transaction. Each layer of security ensures that faster payments does not mean faster fraud; in fact, for one user, fraud losses with IPX are nearly 60% lower than ACH A2A fraud losses. Finally, it is offered through a trusted entity, the Federal Reserve.